Australian Dollar: Disappointing Retail Sales data saw the AUD move lower in Asia yesterday falling from 0.9090 to enter offshore exchange hovering on the precipice of the psychological 90 cent level. Despite the expectation that the move lower was likely to continue overnight the capitulation that followed was totally unexpected as the Aussie dollar shed almost 3 cents to momentarily exchange below 0.8750. With persistent fears the European situation will continue to intensify and North American equity markets plummeting the AUD/USD was punished by risk adverse investors and a flight to safety. In local releases today the RBA quarterly monetary policy statement will be closely scrutinised although in the current climate fundamentals are likely to remain in the back seat whilst developments offshore continue to dominate trade flows.

- We expect a range today in the AUD/USD rate of 0.8725 to 0.8925

:: Great Britain Pound: The Pound Sterling fell dramatically overnight falling below the psychological 1.5 level against the Greenback following widespread panic on financial markets. With the election underway and continued risk aversion due to European debt and U.S equity falls the Pound was shunned by investors falling to 1.4720 opening this morning at 1.4755 against the Greenback whilst a large drop in the Aussie dollar kept the GBP/AUD cross rate protected to open at 1.6635.

- We expect a range today in the GBP/AUD rate of 1.6550 to 1.6750

:: New Zealand Dollar: The Kiwi rallied in Asia yesterday with positive local economic data raising the likelihood of the RBNZ increasing interest rates sooner rather than later. First quarter employment increased a much larger than expected 1%, well above expectations for a 0.2% rise. Adding to the upside momentum was a bullish speech by central bank governor Bollard sending NZD/USD up from 0.7165 to a high around 0.7275 in afternoon trade. With offshore markets extremely volatile overnight the Kiwi relinquished its gains and opens this morning back at 0.7120.

- We expect a range today in the NZD/USD rate of 0.7025 to 0.7175

:: Majors: Financial markets were sent into a tailspin overnight with panic selling on equity markets heightening risk aversion and fears of widespread sovereign debt defaults across the Euro-zone. It is unclear at this stage as to what triggered the panic selling of equities during the U.S session which initially saw the Dow shed almost 1,000 points or 9% in quick fashion. Rumour has it a “fat finger” or an incorrect sell order instigated the move lower and so the market bounced back quite quickly but failed to recover all of the lost ground. Earlier in the session the ECB kept interest rates on hold as expected however the market was disappointed the central bank is not considering a plan to provide liquidity on bond markets in order to sooth further default fears. As a consequence EUR/USD continued to plummet falling from 1.2825 to open this morning at 1.2645 after having exchanged close to 1.2500. EUR/JPY also capitulated dropping a massive 8% from above 120 to a low around 111 and opens this morning at 114.75. With the cross rate lower USD/JPY also collapsed to 88.50 before bouncing from the lows and opens in Asia at 90.80 heading into this evenings much anticipated non-farm payroll data one gets the sense investors will further punish the EUR/JPY cross should the numbers disappoint and that it would take much larger than expected increase in jobs, somewhere around the vicinity of 200k or more, in order for markets to recover before the weekend.

:: Data Releases: AUD: RBA Quarterly Monetary Policy Statement NZD: No Data Expected Today USD: Apr Non-Farm Payrolls & Apr Unemployment rate GBP: Apr PPI & UK Election Results EUR: Mar German Industrial Production JPY: Apr Monetary Base